GUS launches assault on furniture market as profits rise

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The Independent Online

GUS threw down the gauntlet to its struggling furniture retail rivals yesterday, announcing plans to increase its share of the £15bn market.

The retail-to-financial services group has launched a new catalogue, Furniture Direct, to help it sell more sofas through its Homebase chain. It is exploiting the scale that came with combining the home improvement group with Argos, the catalogue retailer.

Terry Duddy, who runs the Argos Retail Group, said: "The furniture market is big, it's growing and it's fragmented. It's not one that has got a large retail competitor." The new catalogue is being trialled in 15 Homebase stores but could be rolled out across the group's other 268 outlets.

The move by GUS comes just weeks after Lord Kirkham took his sofa group, DFS, private. He claimed the market was too tough for a quoted player. MFI and Courts, two rivals, are struggling amid lower consumer demand for "big ticket" items such as furniture.

GUS said yesterday that it would save twice as much as it had bargained for when it bought Homebase two years ago. By combining the products that overlap at both groups and looking for sourcing savings, it expects to save £40m a year by 2006.

The group, which has launched a strategic review of its businesses, beat City forecasts with a 31 per cent increase in interim profits before tax to £323m. Sales and profits from its three divisions, Argos Retail Group, Experian and Burberry, all grew by double digits. Analysts expect GUS to demerge Experian, its international credit-checking business, as a result of its review.

Commenting on the review, John Peace, the chief executive, said: "It will be a continuation of the work we've been doing over the past four to five years. It's not just about disposing businesses but also about buying them." GUS has been linked with a possible bid for MFI.

Mr Duddy said Christmas would be "more competitive" than last year.

Underlying sales growth at Argos and Homebase during the six-month period rose 7 per cent and 4 per cent respectively. GUS shares rose 4.5p to 875p.